| Litigants: | Klor's, Inc. v. Broadway-Hale Stores, Inc. |
| Arguedatea: | February 25 |
| Arguedateb: | 26 |
| Argueyear: | 1959 |
| Decidedate: | April 6 |
| Decideyear: | 1959 |
| Fullname: | Klor's, Inc. v. Broadway-Hale Stores, Inc. |
| Usvol: | 359 |
| Uspage: | 207 |
| Parallelcitations: | 79 S. Ct. 705; 3 L. Ed. 2d 741 |
| Prior: | 255 F.2d 214 (9th Cir. 1958); cert. granted, . |
| Holding: | A retail chain's persuasion of a number of suppliers not to deal with a competitive retailer is a per se illegal boycott. |
| Majority: | Black |
| Joinmajority: | Warren, Frankfurter, Douglas, Clark, Brennan, Whittaker, Stewart |
| Concurrence: | Harlan (in the judgment of the court only) |
Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959), is a United States Supreme Court decision holding that a retail chain's persuasion of a number of suppliers not to deal with a competitive retailer was a per se illegal boycott – under a hub-and-spoke conspiracy theory.
Broadway-Hale Stores, Inc., a major California department store, induced Admiral, Emerson Radio, General Electric, Philco, RCA, Whirlpool, Zenith, and other major appliance manufacturers to stop selling to Klor's, a price-cutting retail store.[1] Both parties had stores in San Francisco next door to one another. Klor's brought an antitrust treble damages suit, alleging a conspiracy among Broadway-Hale and the manufacturers.[2]
By pre-trial order the case one was limited to a single conspiracy charging a Sherman Act § 1 violation. The defendants moved for summary judgment, and the lower courts agreed that the case should be summarily dismissed, on the grounds that Klor's was only one of hundreds of stores selling such goods; therefore, its elimination as a competitive factor did not substantially lessen competition in the general market – there was no public injury.[3] Klor's did not show or even allege "that, by any act of defendants, the price, quantity, or quality offered the public was affected, nor that there was any intent or purpose to effect a change in, or an influence on, prices, quantity, or quality."[4]
The issue of whether a conspiracy existed was by-passed by the summary judgment motion, even though the allegations appear to have described only a "rimless wheel conspiracy", one without the spokes (appliance manufacturers) being connected to one another, knowing what one another were doing, or being interdependent.
Justice Hugo Black delivered the 8—1 opinion and unanimous judgment of the Court, reversing the lower courts' dismissal of the case, on the grounds that Klor's sufficiently pleaded a per se illegal boycott conspiracy.[5] The Court said, "Alleged in this complaint is a wide combination consisting of manufacturers, distributors, and a retailer" that drives Klor's "out of business as a dealer in the defendants' products."[6] It is immaterial, Black insisted, that "the victim is just one merchant whose business is so small that his destruction makes little difference to the economy":
Justice John Marshall Harlan II concurred in the judgment.
Professor James Rahl sees the Klor's case as posing a dilemma for the Supreme Court, which it dodged by refusing to explain its ruling. At that time, the antitrust rule on boycotts was not clear:
The second alternative was quite problematic:
Therefore, the Court simply did not explain why the alleged boycott was illegal: "What the Court actually did was to avoid coming to grips with the dilemma. As a consequence it is very difficult now to know what the rule on boycotts is."
Rahl explains the Court's difficulty:
Rahl points out that some joint refusals to deal are innocuous or even beneficial. The line between exclusive dealing arrangements and boycotts is nebulous. Joint marketing agreements involve undertakings not to deal with alternative marketing channels. Joint venturers may agree to invest all their funds in one business vehicle. "All agreements to deal on specified terms mean refusal to deal on other terms." If there is no requirement as to competitive effect, a rule against boycotts becomes "completely unmanageable."[7] It therefore, Rahl maintains, seems "clear that any comprehensible per se rule for boycotts is also out of the question."[8]
In 1985 in Northwest Stationers v. Pacific Stationery & Printing Co., the Court held that not all boycotts which exclude competitors are subject to per se scrutiny.[9] The Court ruled that the expulsion by a retail office supply purchasing cooperative of one of its members was not per se illegal absent a showing that "the cooperative possesse[d] market power or exclusive access to an element essential to effective competition.[10]